1. Common Property Resources
Not Excludable
&
Rival in Consumption

2. The Different Kinds of Goods
Types of goods
Private goods
Excludable & Rival in consumption
Public goods
Not excludable & Not rival in consumption
Common resources
Rival in consumption & Not excludable
Natural monopoly
Excludable & Not rival in consumption

3. Common Resources Common resources The tragedy of the commons
Not excludable
Rival in consumption
The tragedy of the commons
why are common resources used more than is desirable
Social and private incentives differ
Arises because of a negative externality
Don’t take into account costs imposed on others when equating PMB and PMC

4. Common Resources The tragedy of the commons Negative externality
One person uses a common resource
Diminishes other people’s enjoyment of it
Common resources tend to be”overused”
Government - can solve the problem
Regulation or taxes
Reduce consumption of the common resource
Turn the common resource into a private good

5. Common Resources Some important common resources Clean air and water
Congested roads
Fish, whales, and other wildlife

6. Tragedy of the Commons Tragedy of the commons Original example:
Occurs when a rival (but non- excludable) good becomes depleted or ruined
Original example:
Garret Hardin, Science Magazine, 1968
Cattle grazing
Commons = shared area that all cattle farmers get to use to let cattle graze
Lecture notes:
The commons is an area maintained by the public government. It can sustain a limited amount of cattle; it needs to sustain itself over time.